It is easy to admire the concept behind the IQ Merger Arbitrage ETF (MNA), seeking investment results that track, before fees and expenses, the price and yield performance of the IQ Merger Arbitrage Index.
The IQ Merger Arbitrage Index aims to achieve capital appreciation by investing in global companies that have been publicly announced to be bought by an acquirer. This unique approach is based on a passive strategy of owning shares of certain announced takeover targets, with the goal of generating returns that are representative of global merger arbitrage activity.
The strategy also includes short exposure to global equities as a partial equity market hedge. In doing so, it uses a tax-efficient, rules-based approach to gain exposure to global merger arbitrage activity.
The fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in the stocks included in its underlying index. That underlying index uses a systematic investment process designed to identify opportunities in companies whose equity securities trade in developed markets, including the United States. The non-diversified fund invests in stocks that either have been announced as a merger partner for a buyer, an acquisition or another buyout-related transaction.
MNA provides diversification benefits and low correlation to other asset classes, since its returns are driven primarily by the successful completion of deals.
The fund’s total net assets are $461 million, and its inception date is Nov. 17, 2009. The exchange-traded fund currently trades just under $32 a share with an expense ratio of 0.76%, meaning it is relatively expensive to hold in relation to other ETFs.
However, as with any opportunity, I urge all potential investors to exercise their own due diligence, just as I do, in deciding whether or not this fund fits their own individual portfolio goals.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You may just see your question answered in a future ETF Talk.